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Home My WebLink AboutAgenda Report - March 5, 2003 I-01IT! I..::... 3ACKGROUND INFORMATION. Mayor Hitchcock has requested that the City Manager provide an update regarding the State budget during each Council meeting, Funding. None TfjaQk you, 7 ,fanet S. Keeler Deputy City Manager APPROVED: H Dixon Flynn w4 City 2#19#03 $iate Budget Update councum.doc 02127/03 y mj� o. Many Threats Exist California's Dramatic Revenue Fall4ff General Fund Revenues From Major Taxes (In Billions) 0 M M 91 98-94 95-96 97-98 99-00 01-0AO-" OR Total State Spending Over Time YEE: 1993-94 Through .. Qn Billions) $120 100 sm 0 IN NE 93-94 95-96 97-93 99-00 01-02 03-04 Index Value = 100 in 1993-94 Spending Index 200 180 160 140 120 100 80 60 93-94 Tutsi State Spending Total Spending 95-96 97-98 99-00 0102 03-04 L AOA�ill .Ivy r OV ME M�� 2003-04 I Correctiom� Social Services Higher Education M*m Overarching Considerations 9 Relating to Realignment * Programs, Not Taxes, ShouId Be Focuz >- Counties Need Program Control 4WA as m 0 FA Mewignment Worth Consiaering LL Lana== Id Alt AO- Year -to -Year Percent Change, by Quartea 15% IN m R -10 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 L- 2000 -J L- 2001 -J L- 2002 -J L- 2003 --J L-. 2004 --J Prof its on Upswing Percent Change 2% 15 0 5 97 98 99 00 01 02 08 04 Forecast Lodinews.corn - News, r_ pr SUMNS HGMQ v Natippol Nevis >, sports weather; NchivQs ALjLQ.M.Q:Liv.( FAQ Lodi New*.Sen. Headlines: Qt*ate�s 624 to'r-q-08, QnIYJ W ft -n 4Q-&qqk! Thursday, February 27, 2003 Qpqnly State credit rating won't improve, analyst says By Jgwiifqr F'e ,arson t3onnttlNews-Sentinel Staff Writer The state's top legislative analyst came to Lodi on Wednesday with some disheartening news., Because of this years budget shortfalls, the state's battered credit rating will likely not improve anytime soon. Elizabeth Hill, who has headed the legislative analyst's office sinoe 1986, took time out of her busy schedule to sit down and informally discuss California's budget shortfall and its effect on Lodi and other San Joaquin Valley communities. What she got was more of a grumbling session from various groups already feeling the penny pinching. Hill told elected city, school and county officials at the briefing that Gov, Gray Davis' proposed budget would work only if it was passed by the state Legislature as is -- and that includes raising taxes, "Does the governor's plan pencil out? Only if dramatic action is taken," she said. Last week, Hill's office released its annual analysis of the governor's budget claiming the deficit was overstated by Davis by about $10 billion. The governor estimated this year's budget shortfalls at roughly $35 million. "There's no silver bullet in this budget and no easy solution,' Hill said. 1Qrn0-rIqRatQq ProMpts w0tch qv—(Lr N Alt a waterw %kt—eared-K JILCQLA-gmrftlbe RIM videota-ped intervlews of NA(4 Wqg(flojig! . _q_q_lq toMkowr-pellp RrIg �ar-hftshwu§p qftqr.qLq�h krRst.0, f , Patterson fjMR9b-te–r focuses. AM -009p -on bactOrg—UnA 01@4§ OAR Mem rltary tW.W9kR2q � ZQ P-sA 9T IzAGM-culs Gait High iILQ04M-S QQft%LQqa—r-d- P-Mt%Oes nm-Ralow zones for w0fts0-q!IqI Lnift comonnv Page I of 3 http://www.lodi.iiews.com/display/inii–news/03 --- hil1-030227,txt 2/27/2003 Lodinews,com - News The Legislative Analyst's Office has been providing fiscal UftYPOR and policy advice to the Legislature for more than 55 years, ARVY-1065AP to be a lot of hard swallowing that noods to be done." hAnote-Iong W--Qnge lotp (-(ill's visit to Lodi was organized by Sen. Chuck Poochigian, rMeplion R -Fresno, who also attended the Lodi briefing, which was recorded and will be broadcast by AT&T Broadband on Photos Friday. Representatives came from as far as Ceres and hQP-wj Pn qmtrol VaRey Sonora. to-r"u in"s 9�QWth "The magnitude of the problem is so great," Poochigian. said Wednesday. "It's not easy to find a solution. There's going Stucktjqn V ygmgrj's to be a lot of hard swallowing that noods to be done." P-"i-QUA-4"te W--Qnge lotp Other budget issues brought to the table Wednesday rMeplion 'included the proposed vehicle license fee increase, teacher layoffs and rising coilege costs. Photos Hill, for example, said community college fees could increase even more than already proposed, spPAgn f9r Dick Rogers, from the Tuolumne County Sheriff's Department, came concerned with the state's credit rating. "What's being done to get it up?" he asked H11L While she didn't have an answer, Hill, a Modesto native, said the state will likely need to get a loan by June to deal with its cash flow issues. Assemblyman Alan Nakanishi, R -Lodi, a former Lodi mayor and councilman who took a familiar seat in front of Carnegie Forurn on Wednesday, said he was informed that the state will borrow an estimated $2.5 to $2.8 billion, at an interest rate of $25 million per $1 billion. "We must act quickly - and we're not," he said. "I went into the Legislature thinking I was going to solve the budget problems. It's month three, and we're still at square one." Mayor Susan Hitchcock was curious when a balanced budget could be expected from the state. Poochigian said no one could provide an answer, "All of us should be hopeful - that we get there without too much trouble, but I would not bet on that," he said. "What ft trying to say is, I don't know." John Gray from Lincoln Unified School District echoed Hitchcock's feelings. "When schools have to balance their budget, it has to be on time and we basically have to go on the best guess and revise," he said, adding that he hopes the state will stabilize school funding and defer legislation passed last year that would affect district budgets. Page 2 of 3 http://5Nlww,lodinew,,.com/displ.ay/inn-,news/03-hill-030227.txt 2/27/2003 Lodigcws,cor - News "We have to have the handcuffs off to do our jobs," Cray said. In Lodi, even in the midst of trying to approve its own city budget by. lay, officials are still bracing for potential cuts thanks to the state's budget woes, Of the city's .6 million annual budget, roughly i percent, or $4.7 million, comes iTom the state through vehicle license fees and grants. Sales tax, property taxes and franchise taxes could also be affected and passed down to the city. Comments flout this story? Send mail tonew!�rQom. To subscribe to the nodi News -Sentinel, till out our onitne form or call our Subscribos Se-,V4C$'s Department at {20% 333-1400. Email this st .ry forint this...story Acme I B sirs ss. I Fe91urqs l News Q,0DU-AEie* l opinLm i S-€i4ts 15 P.rrl-update A cltiv s l _tct�m tt_v Cr asst` ds {Rea#_ stat i $ubsrtibe Send Your comments at)out this Web site to: p3r?3�ets�iorlir�ews,c�m. L€ 6 dews -Sentinel, Lodi, California_ Page 3 of 3 ht.tp./Iwww.iodinows.com/display/inn_news/03—hill-.-030227,txt 2/27/2003 Davis plan hits a snag Tax -hike revenue would have to go to schools, legislative counsel says. By Alexa H. Bluth -- Bee Capitol Bureau Published 2:15 amPST Wednesday, Februaty 26, 2003 The Legislature's lawyers have issued a legal opinion that could unravel the centerpiece of Gov. Gray Davis' plan to bridge the state's massive budget gap. The Legislative Counsel's Office, in a privately circulated opinion obtained by The Bee, concluded that California would be legally required to divert billions of dollars in revenues from Davis" proposed tax increases to schools rather than local governments. The opinion could derail the "realignment" plan in the governor's 2003-04 budget because it will siphon off to schools as much as half nfthe $8.3 billion raised from increasing taxes unshoppers, smokers and top earners. Davis designed the namHgornent plan toshift several state programs to local governments and finance them with new taxes that bypassed the state treasury and theoretically avoided Proposition 98^s provisions. ~The legislative counsel's opinion is only confirming what was suspected to be e questionable end run around Proposition 98," said Kevin Gordon, executive director of the Ca}|forniaAssociation of School Bu5/nossOfMcio|s. To make Davis` plan work in accordance with the opinion, lawmakers would have to suspend Proposition 98, the 1988 initiative that guaranteed to kindergartens through community colleges a certain amount from the state each year according to a complex formula, \ndudingtying school spending tothe growth in state revenues. Davis said that $U.3 billion in tax increases included in his realignment plan would not apply to the measure beogu5e it would be earmarked specifically for cities and counties. The Democratic governor hoped the plan would temper Republican criticism of tax increases because they would benefit local governments. Davis rnwde|od his realignment plan after similar approach taken by former Republican Gqv, Pete Wilson, The Wilson plan also circumvented Proposition 90and was newer challenged in court, said [}nn Carson, director ofthe health and welfare section of the nonpartisan Legislative Analyst's Office. But the new opinion said revenues generated by a "statutory increase in the cigarette tax would be proceeds of taxes that are within the general fund and, as such,, would be included within the state's rninirnurn school funding oNigation.^'The opinion includes similar findings for the sales tax and income tax increase proposals. Davis spokeswoman Hilary McLean said the counsel's office and the governor's legal advisers have "differing legal views" on the matter, "Our current view isthat it but she said Davis requested in his budget that working groups assemble to study the intricacies of realignment, Assembly Speaker Herb Wesson, D -elver City, requested the opinion to clarify whether the proposed realignment and accompanying tax hikes would affect the state's school spending obligations, spokeswoman Patricia Soto said. The legal office issued its opinion Feb. 12, but Wesson has not made it public. Wesson could not be reached for comment Tuesday evening. Suspending Proposition 98 is thought to be a politically incendiary move that also could face legal challenges. If lawmakers vote to suspend the law, the state would likely be required to repay schools billions of dollars in the future. Davis has warned that lawmakers will either have to make $8 billion more in cuts than he proposed or raise taxes for state operations if his realignment plan fails. Legislative Analyst Elizabeth Hill last week largely endorsed shifting certain state responsibilities to counties and cities, but she raised the possibility that the new taxes to fund the shift could be applied to the Proposition 98 guarantee. Specifically, Hill estimated that half of the revenues generated from tax increases would be legally required to be directed to schools rather than to local governments unless the schoos proposition is temporarily shelved. "I never have thought that this realignment had any substantive purpose other than to increase taxes without Suspending Prop, 98," said John Campbell, R -Irvine, vice chairman of the Assembly Budget Committee. "If this opinion holds, then the Democrats will have to make a decision. Are they prepared to increases "'axes and suspend Prop, 98?" The legislative legal opinion is just the latest snag since Davis unveiled his budget plan Jan. 10. The budget has drawn criticism of its reliance on tax hikes and proposal to eliminate $4 billion in funding for local governments. Davis also faces threats of a legal challenge if he agrees to Assembly Democrats' request that the state's vehicle license fee be restored to pre -1998 levels. "There's no question that it complicates an already very complicated budget dynamic in the Capitol," Gordon said, "The bottom line is that we are going to have to find ways to satisfy the Constitution and solve the budget mess as well," I e135 NOU Ci 142 277 Cities Are Net Donorsto the State J�qq�iqA_Fee Relief State General Revenue to Cities in millions r F :ilCl FY - EY—OL-0-2 E TAA 1 2_..._...128 135 518 i -------------------- tq!ionAry,(ocal Assistance 1P uv6 ID -...a -j�i v__._...»A171m ---------------� fl�E?P1tlE►vC{t�$ lin - iii ------------------ . r_....1 Police ��t�n�ai€s r�r� �� F��.._._ m_______________ 57.._..»m.._ 7.s 1498 VLF Ba&fill cut +�� t kifl Fkelief ,.s. 36 6 3 .»_..... o__,q..--------..„.„__A__._.---e..A--a_.-----_„..._-_..,_e_..,.-------------------------- -------- 3 . 15Q ttii i 's%rris - ___ 25 25 23 _n..e. mTOTAL 16 92 Local Assistance 314 626 369 362 1,673 F gp�,jy OC -708 -779 r_.... AF on edevelo Mgnt Aq�ncies .m _71....__ .:2146 -71 t; State -$292 -$26 -$336 -$469 -$1,144 California City Financial "Assistance" t the State Under Governor's Proposed FY03-04 Budget & FY02-03 Midyear Cuts e135 NOU Ci 142 277 J�qq�iqA_Fee Relief r . �. Assistance i -------------------- ------------------ VLF Ba&fill cut i .9- -$3,596 Cities not including the City/County of Son Francisco. Prx po xitftan 172 Public Safety Augmentation funds are not state general fund. This chart dws NOT include: (a) Taxpayer reti f pro xams.lisled ira the state budget under "local assistance including: the VLV bark€r€€l, Senior Citizen property Tax Relief, HomeownerV Property Tax relief, and Witfrarrtson Act re€rnbufsements. These programs provide taxpayer relief from the $tate via reductions in local tuxes. They do not provide fiscal assistance; to locai government, (b) State mandate. raimbursenwints. These legal ob?igations of the state reimburse local gauerr menl for the costa of program mandates imposed by the State. They do not provide fiscal assistance to cities. (c) SPeciel teat orae -Aire project allocationa mjgc 22 Jars 03 LEAGUE OF CALIFORNIA CITIES im MI Cities are Net Donors t State General Fund F ®00 FY 00®01 FY 01-02 FY 02-03 *State general fund assistance plus voter approved Prop 172. Does not include tax relief programs e.g the VLF backfill, HOPTR, etc. "FY02-03 based.on current law miqu reY28,8oW3 LEAGUE OF CALIFORNIA CITIES Governor's Proposal Cu:t.s 0 into City Revenues F2®3 FY03-04 State general fund assistance plus voter approved Prop 172. "Reflects Gover€ or" proposed cuts